Q2 2023 Cumberland Pharmaceuticals Inc Earnings Call

Good afternoon, and welcome to accomplish Pharmaceuticals second quarter, 2023 company update and financial report.

This call is being recorded at Companys request and will be archived on the company's website for one year from today's date.

Now I'd like to turn the turn it over to Mommy August account supervisor as adults and agency, who handles condiments communications Mollie. Please go ahead.

Hello, everyone. Good afternoon. Thank you for joining today's call.

Earlier this afternoon Cumberland issued a press release announcing the company's financial results and operational update for the second quarter ending June 30th 2023.

<unk>, which includes the related financial tables can be found on <unk> website at www Dot Cumberland pharma dotcom.

Somebody management will share an overview of those financial results during today's call.

I'll also provide an overall company update including a discussion of its brand pipeline and partners.

As stated in today's call are a J Kazimi <unk>, Chief Executive Officer, Todd Anthony Our Vice President organizational development, and Jon Hamm, Chief Financial Officer.

Please keep in mind that there are discussions may include forward looking statements as defined in the private Securities Reform Act those statements reflect the company's current views and expectations concerning future events and they involve risks and uncertainties.

There are many factors that could affect future results, including natural disasters economic downturn public health epidemics international conflicts and others that are beyond the company's control.

Those issues are described under the caption risk factors in Cumberland Form 10-K, as well as any additional updates filed with the SEC any forward looking statements made during today's call are qualified by those risk factors.

Despite the company's best efforts actual results may differ materially from expectations. So the information shared on this call should be considered current as of today only.

Please remember that the company is not responsible for updating any forward looking statements, whether as a result of new information or due to future developments.

During today's call there will be several references to Cumberland marketed brands full prescribing and safety information for each brand is included on the individual product websites and the links to those sites can be found on our corporate website at www Dot Cumberland pharma dotcom.

The company will also provide some non-GAAP financial measures with respect to its performance and explanation and reconciliation to GAAP measures can be found in the financial tables of the earnings release that was issued earlier today.

If you have any questions. Please hold them until the end of the call at which point, we'll be happy to answer them.

With that overview I'll turn the call over to comprehend Chief Executive Officer, a J kazimi.

Thank you Molly and good afternoon to everyone. We do appreciate you've taken the time to join US today, and we will share the how the first half of the year has gone.

On today's call will provide both a company update as well as he reviews, our financial results for the second quarter 2023.

So let's get started.

I'm pleased to report an overall successful second quarter and first half of the year.

The second quarter, our team worked diligently to advance our business as the operating environment continued to slowly improve from the pandemic and post pandemic challenges that we've been facing.

Revenues for the second quarter of this year for $10.9 million up 6% over the same period last year.

18% sequentially from the first quarter.

Operating expenses were down for the second quarter in a row.

Most Margaret continued to improve to 86% for the quarter.

Also delivered positive earnings for the second consecutive quarter growing adjusted earnings of $3 $8 billion of cash flow from operations during the first half of the year.

Moreover, there were many positive developments during the quarter.

In June we launched our newly expanded oncology sales division to support our saying cuso product.

The first FDA approved <unk> durable prescription patch to help oncology patients tolerate their chemotherapy treatments and it's been contributing to our business. Since you joined our portfolio last year.

We're also completing the transfer of the products manufacturer to a new facility.

Following FDA approval of that site. We're now planning for the first supplies of Cumberland packaged product to be manufactured there over the second half of the year.

Meanwhile, as of July 1st the transition of ready tracks to Nordic pharma is largely completed.

In may the FDA approved expanded labeling for our Caldolor product intravenously delivered formulation of ibuprofen to now include its use in infants three to six months of age and in June we announced the publication the Peachtree pediatric drugs journal of positive results.

Our clinical study investigating the safety and pharmacokinetics of Caldolor in those newborn infants.

As a reminder.

Regarding capital or we believe it will be eligible for special Medicare reimbursement starting in 2025 under the new no pain legislation.

That act was approved earlier this year and requires Medicaid to provide separate and more favorable reimbursement for non opioid products used to manage pain during surgeries conducted in an outpatient hospital department.

Ambulatory surgical center.

Touching next on our clinical programs, we're continuing to sponsor a series of studies to evaluate I fisherman, a potent and selective thromboxane receptor antagonist in patients.

Medical seats.

In may the FDA cleared the investigational new drug application for a phase two study of Accenture ban in patients with idiopathic pulmonary.

Pulmonary fibrosis is the most common form progressive fibrosis interstitial lung disease.

We look forward to launching that fighting fibrosis trials soon.

And Additionally, we closed or completed the analysis of the data from our phase two study in patients with a severe form of asthma known as aspirin exacerbated respiratory disease.

And an update on our <unk> phase two study results in patients with <unk>.

Shed muscular dystrophy, which presented at the annual parent project muscular dystrophy conference in late June .

And we plan to await results from all of these phase two clinical programs before we decide on the best path to further develop the product towards its approval.

During the second quarter the F D. A uniformed Cumberland does it hit.

Granted us a second barrier to innovation waiver that would bring the total to approximately $3 million in refunds of prescription drug fees that we had previously paid.

The FDA granted each waiver after concluding that Cumberland did meet saturating the statutory criteria based on the innovation associated with our <unk> clinical development programs.

The funds could be better used to advance those studies.

We did receive reef both of those refunds in June .

Turning next to some further highlights on our financial performance during the second quarter.

As I mentioned net revenues were $10 9 million, 6% up 6% over the prior year period and up 18% over the first quarter of this year.

If you look at our product performance during the second quarter Chris.

Crystal those sales were up 15% over the prior year period, and the product continues to be our largest selling brand. It's benefiting from its addition on the New York Medicaid Formulary and also the support from our two co promotion partners.

But I bet that if sales are rebounding and they were up 35% over last year as we do have a number of new initiatives underway to improve that brand's performance. We're also working with our partners in their efforts to register and launch by bad as several international markets.

Should provide.

Further significant catalyst for the products for future growth.

Caldolor sales were up 3% and we look forward to that special Medicare reimbursement I mentioned that will become available in the future.

So that's the only of our four major brands that underperformed so far this year.

And that's due to went into orders in the amount of sales deductions associated with returns and rebates that were part of the brand's transition.

So it hasn't been impacted also by the loss of our co promotion partner.

Looking ahead, we believe those sales deductions that I mentioned are largely behind us now.

And to replace our co promotion partner, we recently expanded our oncology sales division.

So with that overview now I'd like to turn to Todd Anthony Cumberland, Vice President organizational development.

Further discuss our teams at our branch staff.

Hey, Jay.

We support our portfolio of FDA approved medicines through a national sales organization. That's comprised of three separate divisions. Our hospital group calls on key institutional accounts across the country, while our field sales division cover select office based physicians.

During the second quarter, we expanded our oncology sales division to increase our efforts to deliver our newest brands Saint cuso to cancer patients, helping them to better tolerate their chemotherapy treatments.

Like to offer an update on each of our major brands now.

Start with by bad if our potent injectable antibiotic product designed to treat certain serious bacterial infections, including hospital acquired or ventilator associated pneumonia as well as complicated skin infections.

We continue to work on improving by better sales performance with updated marketing and sales strategies that feature new initiatives to increase awareness of this important potentially lifesaving brand.

During the second quarter, we were pleased to see the growing sales of iPad in response to these new efforts.

Moving next to Crystal lows, our prescription strength laxative packaged in a convenient pre measured powder dose, but dissolves very quickly and just for those of water for a clear taste free and great free solution.

We continue to support Crystal those through our field sales force as well as two successful co promotion partnerships and it continues to be our largest selling product.

We have found that the brand performs best in states, where we have Medicaid coverage, New York recently added Crystal loves to its Medicaid formulary and we are implementing a special initiative to increase our presence and share of voice in that state.

We believe that this new coverage is contributing to the increased sales of the product.

Turning now to <unk>, which is our injectable ibuprofen for the treatment of pain and fever.

In May we announced that the FDA approved expanded labeling for the product to now include its use in infants.

The non narcotic agent may now be administered for the treatment of pain and fever in patients as young as three months of age with this newly approved labeling Caldolor is now the only non opioid product approved to treat pain in infants that's delivered through an injection.

Other products in the class like Ketorolac or Meloxicam are not approved for use in children as the safety and efficacy of those drugs have not been established for pediatric patients are.

<unk> injection is not approved for treating pain in children less than two years of age as the safety and efficacy of that drug has also not been established for treating pain in those pediatric patients.

As a J as already mentioned in June we shared the positive results from our clinical study investigating the safety and pharmacokinetics of Caldolor in newborn infants.

The clinical study evaluated the safety and drug exposure profile of Caldolor in 'twenty, four hospitalized and fence between the ages of one and six months, who require treatment for pain or fever.

The results of this study, which were published in the journal pediatric drugs supports the growing body of evidence that demonstrates caldolor is a safe therapeutic option available to practitioners for the treatment of fever and pain in infants and children.

As a J also mentioned, we believe caldolor will be eligible for special Medicare reimbursement under the new non opioids prevent addiction in the nation or no pain legislation, we expect CMS to issue the reimbursement guidelines for Caldolor in 2024.

And the act itself is scheduled to go into effect in early 2025.

Shifting now to St. Cuso, we successfully completed the transition of St Cuso to Cumberland from Kyowa, Kirin and have taken full commercial responsibility for the brand in the United States and this includes its national distribution, it's marketing, it's promotion as well as the medical support activities.

Late last year, the FDA approved moving the products manufacturer to a new facility, which will be the source of future product supplies.

As for ready trucks or product line of Prefilled syringes recall that we have amended our agreement with Nordic pharma, who previously provided us with a license for the U S rights for that product line as of July 1st of this year Nordic has assumed responsibility for the product in the U S.

As a result, we have transferred the ready trucks marketing authorization to Nordic. They have returned to the 180000 shares we previously issued as well as refunded the $1 million milestone payment we had provided.

Nordic is also issued a credit note for $1 million and provided approximately $900000 to reimburse us for F. D a fees.

We launched Greg trucks in the U S market and faced difficulties in accessing a new group of office based physicians and then quickly securing the needed insurance coverage, while ready trucks prescriptions did grow the volume did not justify our continued investment in the brand.

As we've reported previously.

Could you refer a macro marks pack brand suspended their operations due to supply issues.

That facility is now under new ownership and new management and we're currently awaiting availability of a potential supply from their operations. We are also exploring other alternatives to restart the products packaging.

Additionally, we're transitioning to a new manufacturer for our Viper salt product.

We have found a new facility and are awaiting FDA approval for the plant before resuming shipments our new manufacturing partner is working with the FDA to address several form 483 and warning letter issues in a timely manner. Meanwhile, we are working with them to prepare a special interim.

Supply of compounded product for critically ill patients.

Well that completes my updates for today, So I'll turn it back to you a J well thank you Todd.

We turn to the financial report I'd like to provide an update on our international activities. We continue to support several international partners and their efforts to register our brands in their countries during the second quarter.

Piece of Pharmaceuticals is preparing their submission for the approval of Caldolor in Mexico.

To book Pharmaceuticals is updating thereby that has approval in Saudi Arabia with new manufacturing information as they plan to introduce the product into the Middle East D.

D V farm Who's our partner in South Korea distributing Caldolor has now also submitted for the approval of iPad is in their country.

I've added partner for the Chinese market Sky clubs Pharmaceuticals has continued to respond to the regulatory inquiries there is there.

They seek approval forget for a buyback is in their country.

We are awaiting the approval of these four initiatives and we look forward to the launch of our products in those countries.

With that international update I'd now like to turn it over to our Chief Financial Officer, John him to review, our second quarter financial results John .

A J for the three months ended June 32023, net revenue from continuing operations were $10 $9 million, an increase of 6% over the prior year period, and 18% sequentially from the first quarter of 2023 net revenue by product for the second.

Order of 2023 included $4 $1 million for Crystal was $2 $2 million to revive bad of $1 $9 million for St Crusoe, and $1 2 million for Caldolor I'd like to note that net revenue for the quarter was impacted by an unusual amount of sand cuso deductions associated.

<unk> with the products transition. Therefore, we continue to believe that our performance is best evaluated on an annual basis total year to date net revenue were $21 million year to date product revenues totaled $8 $4 million for Crystal rose $4 million.

Bad of $3 $8 million for sand Crusoe, and $2 $2 million for Caldolor. We also favorably settled the outstanding litigation, we initiated to secure $1 million in milestone payments associated with our buy batter product as a result, we received a $1 million which was written.

Courted as other revenue during the second quarter, turning to our expenditures total operating expenses for the second quarter were $10 $9 million compared to $12 $1 million for the prior year period year to date expenses totaled $21 $6 million.

Net income for the quarter was <unk> $9 million and when a noncash expenses are added back the resulting adjusted earnings were $2 $3 million or 16 cents a share the year to date adjusted earnings were $4 million or 27 cents a share both net income and adjusted.

Our earnings have improved significantly over last year also please note that the adjusted earnings calculations do not include the additional benefit of the point of the half million dollar cost of goods provide bad events here at Coosa during the quarter year to date, the benefit is $900000 that inventory.

He was received as part of each product's acquisition. So total cash flow from operations was $3 $8 million.

As a reminder, our financial statements have been significantly impacted by the addition of buyback and St. KUSA two our product portfolio as a result of the buy bad of acquisition, a total of $34 million in new assets was at it including approximately $21 million in inventory $12 million of intangible assets.

And $1 million of goodwill the financial terms for the Vivat transaction included a $20 million payment upon closing and a subsequent $5 million milestone payment. We also continue to provide royalties tied to product sales by batter was our largest acquisition and I'm pleased to report that since we assumed risk.

Possibility for the product in late 2018. It has delivered a total cash contribution of $35 million to our business and therefore has continued generating a return on our $25 million investment so.

<unk> added a total of $19 million in new assets, including approximately $4 million in inventory and $14 million of intangibles. The estimated value of those assets was $14 million at the end of the second quarter, we provided $13 $5 million at closing for the Santa Cruz. So.

The acquisition there are also royalties that we pay based on their brand sales since we started shipping Santa Cruz. So early last year. The product has already provided a total cash contribution of approximately $11 $5 million and we believe it will soon begin to generate a return on our 2014 and a half.

Million dollar initial investment we continue to hold a bank line of credit, which provides up to $20 million in capital and we have set we access that line to help fund the <unk> acquisition, we have been reducing the balance of this loan.

We ended the second quarter, it was $13 $1 million.

The $3 million in refunds of FDA fees associated with their waivers were recorded as other income during the first and second quarters. Both refunds were paid by the FDA during the second quarter.

As of June 32023, we had $89 $4 million in total assets, including $18 $2 million in cash and cash equivalents liabilities totaled $52 $5 million and total shareholders' equity was $37.2 million.

During the second quarter of 2023, we continued our share repurchase program buying a total of 99000 shares. These repurchases included those in the open market as well as those needed to fund the taxes associated with employee vested restricted shares were continuing the process of establishing new trading plans.

For our board members, who will purchase Cumberland shares over 2023 to increase their holdings in the company I'd also like to note. The Cumberland continues to hold over $53 million in tax net operating loss carryforwards and that completes our financial report for the second quarter of 2023 back to you a J.

Thank you John .

So overall, it's been a successful first half of the year, we're particularly encouraged by the recent growth in our Christian lows in our buy bad business, while Caldolor worst performance has been steady it has been good to see the growing body of evidence.

Demonstrating that it's a safe therapeutic option for the treatment and fever of pain in nearly all ages now including infants.

We're also encouraged by the progress with our <unk> clinical studies as we continued to progress therapeutic solutions for unmet medical needs and finally, we're excited about the expansion of our oncology sales division and the opportunity to further help cancer patients will continue with our strategy seeking to Maxim.

It has the potential of our commercial brands progressing our pipeline and also pursuing select acquisitions.

Now, let's open the call for any questions. Operator. Please proceed.

Thank you, Sir ladies and gentlemen that concludes the Companys presentation, and we will now open the call for any questions.

I'd like to ask a question. Please press the star key on your phone followed by the digit one twice that star one one.

Please standby.

Okay.

Okay.

Well, thanks, everyone for joining today's call.

We do understand that many of you prefer a private discussion with management and if so please just reach out to us and we'll be happy to get a call scheduled with you and hold such a discussion.

As always we appreciate your time and your interest in Cumberland, and we look forward to providing another update in the coming months.

Thank you Sir.

Ladies and gentlemen that concludes today's call. If you would like to listen to a replay of the discussion. Please visit the Investor Relations section.

<unk> website I would like to thank you for your participation you may now disconnect.

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